Skip to content

CMA Final · Cost and Management Audit · Cost Audit Programme

A cost auditor is carrying out a recurring cost audit of Himalaya Cements Ltd for the third consecutive year. Which action is required by SCA 105 for such an engagement?

On a recurring cost audit, the cost auditor must assess whether circumstances call for revising the engagement terms and whether the entity needs to be reminded of the existing terms. SCA 105 requires this judgement rather than automatic annual revision or no review at all.

  1. AAlways issue a fresh engagement letter with fully revised terms every year, regardless of circumstances
  2. BAssume the earlier terms continue and take no further step unless management objects
  3. CAssess whether circumstances require the terms of the engagement to be revised and whether there is a need to remind the entity of the existing termsCorrect
  4. DTreat the terms as automatically ending after two years and seek a new appointment

Explanation

SCA 105 para 5.8 requires the cost auditor on recurring audits to assess whether circumstances require revising the terms and whether the entity needs a reminder of the existing terms. It does not mandate automatic annual revision, nor passive continuation without assessment.

Did you get it right without looking?

One question tells you little. A timed set on Cost Audit Programme shows your real accuracy, how long you take and where you lose marks.

Practise Cost Audit ProgrammeFree diagnostic mock

More Cost Audit Programme questions